by Amy Kirtland
I just signed a new lease. No, not for a car, not for a piece of property, but for photovoltaic panels. The panels are “parked” on the south facing roof of my house, and they were installed a few weeks ago. I put $0 down and have signed a 20-year lease agreement that will essentially fix my electrical costs for the next 20 years for a price of $45 a month. The 13 panels on my roof make up a 2.8 kW array that will produce enough energy to cover 96% of my family’s electricity usage. If the system produces more electricity than we use, our utility meter will “run backwards,” and we will receive the credit from Xcel.
This lease program is through a company called Sun Run. They are based out of California, and they are the largest residential solar provider in the United States. Locally, they are working with Namaste Solar to install systems in Colorado.
Initially I was skeptical about signing up for a lease-type program. I’ve never leased a car, so why would I lease PV panels? It took some convincing, namely from my husband, but eventually I came around to the idea of leasing PV panels. By leasing, we have made PV accessible and affordable to us while limiting our financial exposure.
Multiple times during the past three years we researched purchasing a similar PV system, and each time we were either deterred by the upfront cost or the interest rate on the loan. This lease program through Sun Run hit the mark for us. We put no money down and the monthly payment of $45 ($36 goes to Sun Run and $9 goes to Xcel for taxes and service fees to be tied to the electrical grid) replaces our current electricity monthly payment, which averages around $40. Yes, we are paying $5 more a month for our electricity under this lease plan, but within 4 years, assuming that Xcel’s electricity costs continue to creep upwards, we will be paying less. Over the course of 20 years, we are projected to save nearly $4000 on our electricity costs. Yes, some of you will argue that the cost of coal is currently decreasing and that my projections are incorrect. Based on the price of coal today you might win the argument, but in the long run, I’m going to bet coal, being a finite resource, will become more and more expensive. If I’m wrong, then oh well, I guess I’ll just pay $5 extra per month to know that I personally have drastically reduced my carbon footprint.
To be specific, over the course of the next 20 years as I use the sun to fuel my electrical needs rather than coal, I will eliminate the production of 77 tons of Carbon Dioxide (global warming), 321 pounds of Sulfur Dioxide (acid rain), and 275 pounds of Nitrogen Oxide (smog). Whew, I feel pretty good about my decision to lessen my dependence on coal!
In the past few weeks numerous neighbors have walked by our house and asked about our new PV system. After explaining that it is a leased system, the next questions asked are about what happens at the end of the lease and what happens if we move/sell. At the end of the 20-year agreement, there are a couple of options: 1) we can buy out the system for its market rate value at that time, 2) we can re-sign the lease, or 3) we can have the panels removed at no cost. 20 years seems like a long ways away, and I’m confident that one of those three options will surface as the obvious choice at that point in time in the future. So what happens if we sell our house before our lease agreement with Sun Run is up? We have three options: 1) we can transfer the agreement to the new owners at no charge, 2) we can pre-pay the remaining lease payments, or 3) we can purchase the system for the market-rate value at that time. Options 2 and 3 don’t seem like great choices to me unless we are nearing the end of the 20-year agreement, but option 1 seems like a solid and realistic choice to me if we were to sell our house within the next 10 years. Of course, we would have to find a buyer that wanted to assume this lease agreement, yet I think that most potential buyers in Boulder would be interested in assuming a fixed lease that covers 96% of their electricity costs.
Undeniably, there are drawbacks to leasing. I don’t outright own the panels at the end of the lease, and depending on my financing mechanism, I could potentially save more money in the long run if I bought the panels instead of leasing. Even when I weigh these cons, I still think that leasing makes the most sense for me personally. When I considered purchasing a PV system, I would have paid approximately $7000 for a comparable system after cashing in on rebates and tax incentives. Assuming I found a 20-year loan for $7000 with a 5% rate, I would pay $46.20 per month to pay off the loan. Wow, this monthly payment is surprisingly similar to the $45 I will pay through the Sun Run program. In addition, Sun Run will maintain and service my panels for the life of my lease, and I did not have to pay any upfront costs or wait until next April to receive the tax benefits. Likewise, in 20 years from now, I can decide whether it is worth reinvesting money in PV panels or instead into a newer and potentially more efficient technology.
I have chosen to lease PV panels, some people might choose to buy and own their system. Regardless of how one finances it, investing in solar is reducing our reliance on fossil fuels and supports the renewable energy industry. This is the direction we, as a culture, need to be heading!